How the Hidden World of Antiquities Dealers Provides Liquidity to a Volatile Market

The Cypriot antiquities market is a niche within the broader realm of ancient art, characterized by its small size and stringent regulations. These regulations, which aim to protect and preserve Cyprus's rich cultural heritage, range from outright bans on the sale and export of certain artifacts to the requirement for costly and complex export licenses. Provenance documentation is also a crucial aspect of the market, as it helps to establish the legal ownership and history of an artifact. However, even with proper documentation, there is always the risk of items being seized without compensation to the current holder.

The Volatility of Antiquities Markets

The limited number of buyers and the specific focus on Cypriot artifacts contribute to this instability. Unlike the more popular Hellenic, Roman, or Egyptian art markets, which attract a wider range of collectors interested in Mediterranean and Near Eastern antiquities, the Cypriot market caters to a more specialized audience.

At any one time there only exist a couple of larger-scale collectors with a few dozen or more small ones.

The Department of Antiquities in Cyprus plays a significant role in regulating the market, with dedicated auction teams constantly monitoring listings across the internet and various auction houses. These teams are known to send official letters threatening legal action, requesting that sales be postponed or canceled if they suspect any irregularities or lack of proper documentation.

To fully understand the dynamics of the Cypriot art market, it is essential to examine two key aspects: how artifacts enter the market and who the buyers are. Typically, Cypriot artifacts become available for sale through estate sales, following the passing of a collector, or when a collector decides to downsize their collection. These events can sometimes result in relatively large groups of Cypriot artifacts being offered for sale simultaneously, providing rare opportunities for interested buyers to acquire pieces.

Scarcity & Falling Supply

There are no exact numbers on the amount of Cypriot antiquities in private hands, and the research behind this will be left for another future article. However it is clear that that number is always going down.

Cypriot artefacts were first exported in the late 1800s, with a large amount of export occuring in several waves in 1930s, 1950s and then the 1960s before the final export ban. Finally there are claims that the 1974 Turkish invasion resulted in mass export of looted Cypriot artefacts, however this will be discussed in a future article.

Cesnola exported around 6,000 with the Swedish expeditions exporting around 12,000. Most of these ended up in Museums, but some are now in private hands. Of those in private hands, every few years various Museums, Governments and private collectors, who later donate them, buy up a certain amount which forever exit the private market. No new legal Cypriot antiquities have entered the market since 1970.

When an antiquity is bought by a private buyer, it is not uncommon for it to not be resold for many decades, until that buyers death, at which point their estate often gets liquiditated. This also results in an interesting phenomenon where buyers, who are likely in their 30s to 50s, purchased large amounts in let's say 1969 during the Cypriot Museum sales in Cyprus, are now in their 80s or older. This means that the original buyers of the last legally exported antiquities are sadly dying off, with many of their collections being dispersed and sold.

Infrequent Trading

Estate sales occur often, and sometimes one or two Cypriot items make their way into a larger collection consisting of a random assortment of art, furniture and other antiques. This results in a slow steady trickle of around 5 to 10 Cypriot artefacts being sold per month, of which maybe 1 to 2 are of any real quality.

The other type of Estate sale is when a collector of Cypriot antiquities passes away, and their collection is sold off in one go. This results in a large amount of Cypriot artefacts being sold in one go. By a large amount we mean up to hundreds of items, though usually more around 20 to 60. These types of sales are impossible to predict, they can occur in quick succession or none can occur for multiple years. In recent times these seem to occur once a year on average when looking at multiple years.

Finally, the third way private collectors sell their Cypriot artefacts is simply when they want to get rid of a piece. This usually results in a slow trickle of 1 to 2 items being sold per month.

So in total we have around 100 Cypriot artefacts sold per year. This can be broken down further of course, as collectors don't randomly buy any style or type of Cypriot artefact, but are usually after something highly specific such as a bichrome dish larger than 25cm, or a jug with a specific type of bird drawn upon it. When broken down into small categories, we can see that some categories of Cypriot artefacts are only sold once every 5 years, while others are sold every month.

Putting a Price on Art

In everyday life, what something is worth, seems like an objective figure that we can all agree to based on complex calculations of the economics that go into producing the item and the resulting demand for it. However, in the art world, this is not the case.

At the end of the day the price of Art, like with anything else, is based simply on Supply vs Demand. So if we say, there are 100 Cypriot artefacts sold per year, and there are 100 collectors who each want one piece per year we can try to find a price that makes objective sense. However we have the following problems:

• There is no way to forecast the amount of artefacts for sale, sometimes 200 will come for sale, other times 10.
• There is no way to forecast the amount of collectors, who will be buying this time?
• Collectors want specific goods, what is the probability that the large bichrome jar you are looking to sell will have multiple collectors looking for it?
• How much collectors will like your piece.

The Dynamics of Auctions & Price Discovery

Let's say I want to sell an item, but I don't know its price due to the complexity of the market discussed previously. Well rather than put a price on it and hope that it's not too low or too high, I can put it up for auction.

Auctions can serve as price discovery mechanisms.

I place an item up for auction with a date a month in the future, this allows any prospective buyers time to find the item and start figuring out for themselves what their maximum bids are.

Let's say buyer Michael wants to buy my item and has $5000, whereas buyer Alexis also wants it but only has $3000. When the Auction opens, the bidding may look like this:

The item has now been priced at $3200, even though Alexis priced it at $3000 and Michael at $5000.

The price of an item at Auction is the price that the second highest bidder was willing to pay for it + the minimum bid increment.

How Single Buyers Break Auctions

So what if there is no second bidder? Recently a friend of mine wanted to purchase a Cypriot piece that he valued at $8000 - 9000. When the auction opened he placed his minimum bid of $1800 to start the bidding off, and he waited, and waited:

and he got it for $1800.

So is the price of this item $1800 just because the Auction failed to find a second bidder at that point in time? If a second bidder had appeared that valued this piece at $5000, the price would have been $5000 + the minimum bid increment. Price discovery does not work for single buyer auctions, but that is why Auctions usually have a minimum reserve price, below which the item will not sell.

Antiquity Dealers as Market Makers

Antiquity dealers are a complex topic: they operate in very private interconnected webs of complex hidden relationships that are rarely if ever exposed to the public. We will reserve diving into their world for another article, and instead focus on their role as market markers.

A market maker is an entity that helps facilitate transactions by consistently providing liquidity in a market. Let's say that you want to sell a Cypriot artifact, a Bichrome Oinochoe Jug, you want to sell it within the next month. There is however no guarantee that there will be a buyer for it at the time you want to sell it. You can either set a high reserve price that is your minimum, and the item won't sell, or leave it without reserve and someone will snatch it up at a huge discount.

This is where the antiquity dealer comes in. Their only goal in auctions is to profit from the spread. The spread is the difference between the price they buy the item at and the price they sell it at. If they believe they can sell your Jug at some point in the future for $5000, either by leveraging their network of buyers or by being more patient, they might buy it from you for $3000.

This effectively sets a minimum price for all antiquities on the market. Even if no buyers are around at the moment, the minimum price will always be the highest price a dealer is willing to pay for it. Note that many dealers operate, around a dozen notable ones for Cypriot antiquities.

This Doesn't Mean Dealers are Always Right

So how can Dealers know the price it will sell at when we earlier discussed the complexity in pricing antiquities? Well they can't, but they can make educated guesses.

This often goes wrong, for example in late May 2023 a limestone votive figure sold for $4,410, the dealer then had to pay taxes, transport it from the United States to the United Kingdom and prepare for its sale, bringing it's total price to at least $5000. It soon after came up for sale with a minimum of $5500 and an estimate of $8800. It failed to sell, it then came up again for sale in December of that year, and then again another time in March of 2024. It failed to sell each time. The dealer who bought it for $4,410 is now stuck with it, and will likely have to sell it at a loss.

This in fact happens quite often! However dealers operate under the assumption that on average it doesn't happen. They use volume to make up for the losses they make on individual items.

Conclusion

The Cypriot antiquities market is a complex and niche domain, characterized by stringent regulations, a limited supply of artifacts, and a specialized collector base. The market's volatility is influenced by factors such as estate sales, the scarcity of legal artifacts, and infrequent trading. Determining the value of Cypriot antiquities is a challenging task, as prices are primarily driven by supply and demand, which can be difficult to predict.

Auctions serve as price discovery mechanisms, but their effectiveness can be undermined by the presence of a single buyer. Antiquity dealers play a role as market makers, providing liquidity and setting a minimum price for artifacts. However, their ability to accurately predict future prices is not infallible, and they often rely on volume to compensate for potential losses on individual items. Understanding the intricacies of the Cypriot antiquities market requires a deep appreciation for its unique dynamics and the various forces that shape its landscape.